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Scottish Mortgage Investment Trust (LSE:SMT) shares are a favourite among investors. And it’s easy to see why. The investment trust places its money into a host of exciting and growth-oriented companies with the aim of picking the next ‘big winners’ and beating the market.
And that’s exactly how things have played out over the past three years. The stock has risen 42% over the period. In turn, this means that £10,000 invested then would be worth £14,200 today.
Diversification and growth
Scottish Mortgage offers a blend of diversification and growth by investing in a carefully selected portfolio of global companies that are leaders or disruptors in their fields. The trust’s holdings span multiple regions, including North and South America, Asia, and Europe, which helps mitigate risks associated with any single market or economy.
Its portfolio is heavily weighted towards innovative sectors such as technology, e-commerce, and semiconductors, but also includes companies from the financial services and automotive industries. This broad sector exposure, combined with the trust’s unique allocation to private companies, provides investors access to growth opportunities often unavailable in traditional public markets.
Scottish Mortgage’s growth focus is evident in its commitment to backing transformative businesses with long-term potential, such as Space Exploration Technologies (SpaceX), Mercadolibre, Amazon, Meta Platforms, and TSMC. These companies represent cutting-edge innovation in areas like space exploration, digital commerce, social media, and semiconductor manufacturing.
Here’s a table of the top 10 holdings.
| Company | Percentage of Portfolio |
|---|---|
| Space Exploration Technologies | 7.2% |
| Mercadolibre | 6.6% |
| Amazon | 5.1% |
| Meta Platforms | 4.7% |
| TSMC | 3.8% |
| Bytedance | 3.7% |
| Spotify | 3.7% |
| Ferrari | 3.0% |
| PDD Holdings | 2.9% |
| ASML | 2.8% |
Risks and opportunities
All investments, even diversified ones, carry risk. And one of the main risks here revolves around gearing. This is a practice that essentially means borrowing to invest. And while it can enhance results, it can also magnify losses when the market goes into reverse.
Despite this, it was the first investment I made when I opened my daughter’s SIPP (self-invested personal pension). That’s because, despite the gearing, the trust offers access to a host of stocks, most of which I like, with a single investment. And at £10 a share, it’s fundamentally more affordable than one of her other SIPP investments, Berkshire Hathaway at $500.
And while I could have put that first money into a global index tracker — an incredibly diversified investment — I simply found Scottish Mortgage’s approach more compelling. The trust’s focus on transformative companies, both public and private, gives it the potential to outperform a traditional tracker over the long term.
Ultimately, Scottish Mortgage offers something more dynamic than a plain tracker: a shot at participating in the success of some of the world’s most innovative companies, all through a single, accessible investment.
